CARC – Complete Guide

What Are CARC Denial Codes?

Claim Adjustment Reason Codes (CARCs) explain the **financial reason** behind a denial or adjustment. They help AR teams identify what went wrong and what action is needed.

Why Do We Use CARC Codes?

• Quickly understand payer decisions
• Know if denial is appealable or needs correction
• Reduce repeat denials
• Improve AR workflow accuracy
• Provide clear communication between payer & provider

Who Maintains CARC Codes?

CARC codes are maintained by **X12**. Insurance payers update their systems multiple times per year to match new codes or definitions.

How CARC Codes Work

Every denial includes 2 parts:

• Group Code → High-level category (PR, CO, OA, PI)
• Reason Code → Specific denial reason (1–299 or alphanumeric)

Example: PR45 → Patient responsibility + exceeds fee schedule.

Understanding Group Codes (PR, CO, OA, PI)

🟦 PR – Patient Responsibility

These amounts the patient is legally responsible to pay.

• Deductible
• Coinsurance
• Copayment
• Non-covered service (policy says patient pays)

AR Action: Bill patient or check secondary payer.

Example: PR1 – Deductible Amount

🟧 CO – Contractual Obligation

Adjustments required due to provider–payer contract rules. Cannot be billed to patient.

• Fee schedule reductions
• Bundled services
• PPO write-offs
• Contractual allowances

AR Action: Write off; provider cannot collect.

Example: CO45 – Exceeds fee schedule

🟩 OA – Other Adjustment

Payer adjustments that do not fall under PR or CO.

• Prior payer impact
• System edits
• Duplicate claims
• Coordination of Benefits issues

AR Action: Review payer instructions; sometimes appealable.

Example: OA18 – Duplicate claim

🟪 PI – Payer Initiated Adjustment

Adjustments based on payer policy or medical review.

• Not medically necessary
• Authorization issues
• Coding or modifier issues
• Coverage restrictions

AR Action: Correct and resubmit or appeal.

Example: PI96 – Non-covered charge

🌟 Summary Table